Facebook Unveils Economic Impact Study

ECONorthwest finds that in Oregon Facebook’s capital spending supported, in total, approximately $142.7 million in economic activity, including $51.4 million in personal income and 1,081 jobs.

Facebook commissioned ECONorthwest to evaluate the economic and fiscal impacts associated with construction and operation of their data center in Prineville. Using detailed construction and operating cost data from Facebook and the IMPLAN economic impact modeling software, ECONorthwest traced how Facebook’s expenditures circulate through the economy.

They consider the economic and fiscal impacts at two geographic levels.

First, they consider the impacts of Facebook on the local, economy: where they are the most direct and immediate. Second, they examine the spillover effects of Facebook’s Data Center on other parts of the state. (All dollars are reported in 2011 dollars.)

They estimate that, between January 2010 and December 2011, approximately $14.5 million in capital spending has accrued to businesses in and $61.2 million benefited workers and businesses in other parts of the state. In total, they estimate that Oregon has captured approximately 36 percent (or $75.7 million) of the capital spending on the Prineville Data Center Project to date.

While certain project costs are allocated to specialized labor and equipment coming from outside of Oregon, spending on these has been excluded from the economic impact analysis, i.e., the construction impacts isolate those impacts that accrue to and the state.

2. The economic impacts associated with Facebook’s capital spending in Oregon are significant, and benefit an area and sector (construction) that were particularly hard hit by the latest recession.

Facebook’s capital spending is associated with a total of $24.4 million in economic activity, including $9.2 million in personal income and 234 jobs. These impacts include about 80 direct jobs for local construction and other workers employed on-site, and over $1.2 million in sales for local lodging, eating and drinking, and retail sectors as a result of per diem spending by non-local workers.

In Oregon, Facebook’s capital spending supported, in total, approximately $142.7 million in economic activity, including $51.4 million in personal income and 1,081 jobs. (For both impact areas, the economic impacts attributed to capital spending are temporary in nature and unfold over the project’s last two years.)

3. In 2011, Facebook’s Prineville Data Center operations (ongoing, non-construction activities) are associated with $21.5 million in economic activity in, including $5.5 million in personal income and 111 jobs.

Facebook’s Data Center operations directly employed 55 Facebook and contract employees and had a total payroll of almost $3.3 million. Facebook estimates that the average hours worked per employee was 39 hours per week. Thus, the 55 jobs are approximately equal to 55 Full-Time Equivalents (or FTEs).

The average compensation package (wages plus benefits) for employees at the Prineville Data Center is $59,400 per year. The average annual income, excluding benefits, of Facebook’s Data Center employees is $47,200. To put this into perspective, according to the Oregon Employment Department, the average annual income across all industries in the three-county, area was $35,071 in 2010. Thus, on average, wages atFacebook’s Prineville Data Center are about 35 percent above the average pay in.

4. Almost all of the revenues used to finance Facebook’s Data Center operations are from non-Oregon sources. In this regard, the economic and fiscal impacts associated with Facebook represent net gains for the and state economies.

5. Facebook’s Prineville Data Center operations have appreciable secondary (indirect and induced) impacts that benefit other parts of the state.

The total economic impacts that spill over to other parts of Oregon consist of $17.2 million in economic activity, including $4.8 million in personal income and 76 jobs.

In total, Facebook’s Prineville Data Center operations generated approximately $38.5 million in economic activity, including $10.3 million in personal income and 187 jobs statewide in 2011.

6. Spending associated with Facebook’s Data Center operations generate “multiplier spending effects” that benefit workers and business owners in other sectors of the local and state economies.

All of the impact measures described in Table ES1 can be summarized across direct, indirect, and/or induced impact categories using mathematical formulae to measure and explain what economists refer to as the “multiplier effect.”

In essence, economic multipliers provide a shorthand way to better understand the linkages between a company and other sectors of the economy, i.e., the larger the economic multipliers, the greater the interdependence between a company’s operations and the rest of the economy.

The personal income and job multipliers are 1.7 and 2.0, respectively. This means that every million dollars in Facebook payroll supports another $700,000 in income for workers in other sectors of the local economy, and every 10 jobs at Facebook drive another 10 jobs elsewhere in Oregon.

In Oregon the personal income and job multipliers are 3.1 and 3.4, respectively.

Thus, every million dollars in Facebook payroll supports another $2.1 million in income elsewhere in the state, and every 10 jobs at Facebook drive another 24 jobs in other sectors of the Oregon economy.

7. The economic multipliers reported previously are considerable. On a statewide basis, Facebook’s personal income and job multipliers are 75 and 85 percent greater, respectively, than the weighted average multipliers across all industries in Oregon.

Facebook has committed to, whenever feasible, hire locally and use local contractors and suppliers to construct, operate, supply, and maintain their Prineville Data Center.

The above average multipliers for 2011 operations show that this policy increases Facebook’s economic contributions in Oregon.

6. In 2011, Facebook’s operations in Oregon, and the economic activity they generate, are associated with $3.0 million in state and local tax and fee revenues for taxing jurisdictions in Oregon.

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Cascade Business News, Central Oregon's business newspaper, is a local, family owned and operated by Pamela Hulse Andrews and Jeff Martin. CBN is published the first and third Wednesdays of each month. CBN is a division of Cascade Publications Inc.